Greggs — Performing well in a challenging market

Greggs (LSE: GRG)

Last close As at 05/03/2025

GBP19.04

−178.00 (−8.55%)

Market capitalisation

GBP2,129m

More on this equity

Research: Consumer

Greggs — Performing well in a challenging market

FY24 was a good year for Greggs as its long-term strategy to grow revenue, coupled with more favourable input cost inflation, provided better profit growth than in FY23. In common with many consumer companies, the environment has deteriorated through the back end of H224 and into the start of FY25. Greggs’ value perception continues to improve and it has maintained overall value share of the market, suggesting wider weakness. We reduce our FY25 and FY26 PBT estimates by c 2% and c 9%, respectively, to reflect more conservative growth assumptions and operating margin headwinds.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

Retail

FY24 results

6 March 2025

Price 1,817.00p
Market cap £1,947m

Net cash/(debt) at end FY24

£125.3m

Shares in issue

102.3m
Code GRG
Primary exchange LSE
Secondary exchange N/A
Price Performance
% 1m 3m 12m
Abs (10.0) (31.0) (27.2)
52-week high/low 3,250.0p 2,028.0p

Business description

Greggs is the leading UK ‘food-on-the-go’ retailer. It uses vertical integration to offer differentiated products at competitive prices. Its ambition is to grow revenue to £2.4bn by FY26.

Next events

AGM trading update

20 May 2025

Analysts

Russell Pointon
+44 (0)20 3077 5700
Nick Hawkins
+44 (0)20 3077 5700

Greggs is a research client of Edison Investment Research Limited

Note: PBT and EPS are normalised, excluding amortisation of intangibles and exceptional items.

Year end Revenue (£m) PBT (£m) EPS (£) DPS (£) P/E (x) Yield (%)
12/23 1,809.6 167.7 1.24 1.02 14.7 5.6
12/24 2,014.4 189.8 1.37 0.69 13.2 3.8
12/25e 2,193.7 193.4 1.39 0.69 13.1 3.8
12/26e 2,380.5 197.1 1.42 0.71 12.8 3.9

FY24 results ahead of consensus

Greggs’ FY24 underlying PBT of £189.8m was ahead of mean consensus expectations of £187.2m (source: LSEG Data & Analytics) and our estimate of £183.9m. Previously reported revenue growth of c 11% translated into similar rates of growth for underlying earnings (to 137.5p per share from 123.8p in FY23) and the ordinary dividend (to 69p per share from 62p in FY23). The drivers of profit growth in FY24 were quite different to those experienced in FY23. The gross margin improved by 1pp to 61.8% due to more benign food and packaging inflation than in FY23, while other costs increased relative to revenue, mainly as a result of economy-wide inflationary staff cost pressures and Greggs’ investment in technology.

Current trading and outlook

In the first nine weeks of FY25, 1.7% lfl revenue growth in company-managed stores was relatively weak compared with 8.2% for the same period in FY24, the toughest comparative of the year. January was negatively affected by poor weather, including store closures for a day in Scotland and Northern Ireland. The 1.7% lfl revenue growth includes better growth in February, consistent with Q4 (+2.5%), implying c 1% growth in January. Prices increased at the end of 2024 to recover expected cost inflation for FY25 of c 6%, mainly driven by labour inflation, including the impact of employer national insurance changes due to take effect from April 2025. Management continues to anticipate a challenging H125 before an improvement in like-for-like sales in H225, helped by an easing comparative, and ‘another year of progress’ for profit in FY25. The new infrastructure projects in Derby and Kettering to support future store growth will provide incremental operating margin headwinds of 40bp pa in FY26 and FY27, before some margin recovery begins from FY27 as Greggs starts to utilise the additional capacity the sites deliver. Our new estimates factor in the margin guidance and more conservative revenue growth in FY26.

Valuation

The share price weakness since the start of the year has brought the prospective P/E multiple to 13.1x, a good discount to the average of 18.5x since FY13.

Financials

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